London Fog 'close' to deal to avoid bankruptcy

London Fog Corp. is closing in on an agreement with its bankers that might save it from filing for Chapter 11 bankruptcy protection, but at the cost of ceding some ownership to its creditors.

"We're getting close," said Robert E. Gregory Jr., the company's chairman and chief executive officer. "We're pushing this thing as hard as we can."

The Bank of Montreal, one of the banks in the syndicate, said that the negotiations may be concluded next week. "Everybody is looking to make something work," said Joe Barbera, spokesman for the Canadian bank.

Owing more than $300 million to a syndicate of 23 banks, the Carroll County-based raincoat maker is trying to raise more money from the banks to begin production of its fall line.

A key issue is how much ownership -- equity -- the banks will get for their continued financial backing.

"There will be debt to equity exchange," Mr. Gregory said. "Will they own 10 or will they own 90 [percent]? That's what we're still banging around on," he said.

The company, which had sales of about $350 million last year, is now primarily owned by Merrill Lynch Capital Partners, which holds a 58 percent share, and GKH Partners, a Chicago investment group that holds 36 percent of the equity.

The possible deal with the banks would provide financing in the range of about $100 million, Mr. Gregory said. He did not know exactly how much money the company would get because of the complexity of the deal.

In an effort to reach an agreement, the two sides are meeting in marathon sessions, like one Thursday night in Carroll County that lasted until 3 a.m., Mr. Gregory said. "We got pretty heavy negotiations going on, trying to get it resolved as quickly as we can."

Mr. Gregory, a well-known turn-around executive, was brought in three months ago to salvage the country's premier raincoat company after previous management had added hundreds of million of dollars of debt in a effort to shift production overseas and broaden its production line.

The company's Baltimore plant, its last U.S. factory, restarted production last month and will have a work force of about 220 when it reaches full production in May.

Mr. Gregory has brought the headquarters back to Carroll County from Darien, Conn., where it had been moved a year before.

Besides cutting administrative costs, the move resulted in an undisclosed number of layoffs.

On their side, the banks, led by Chemical Bank of New York, have retained Alvarez & Marsal Inc., a New York-based $l turnaround consulting firm, known for its quick, harsh approach to restoring troubled companies.

The head of the firm, Antonio C. Alvarez 2nd, is now chief executive officer of Phar-Mor Inc., a Youngstown, Ohio-based firm that filed for Chapter 11 in August 1992.

Hired in February 1993, Mr. Alvarez oversaw the closing of more than 160 of the company's 300 stores and the slashing of its work force from about 26,000 to 13,000 during his first year.

Other companies handled by the firm include Coleco Industries, Timex, Resorts International and Western Union Corp.